November 19, 2012 Update

DJIA: 12,588 NASDAQ: 2,853 10-YR TRS: 12, yield 1.573% Oil: $86.67 EURO: $1.2743 YEN: 81.31 

Micro

• SPZ: trading higher as investors build confidence that the US will solve budget dilemma.
• Earnings:  Lowe’s Company (NYSE: LOW) met expected EPS of $0.35 with revenue of $12.1 billion beating expectations by $100 million, Agilent Technologies (NYSE: A) announced a dividend of $0.10 per share.
• The National Association of Home Builders’ November index is forecast to rise as Sandy’s destruction was not felt until late October when many deals where already closed. Data on October existing home sales is due today, both expected to be released at 10:00am. 
• Goldman Sachs’ analysts have upgraded Barclays (NYSE: BCS) from “neutral” to a “buy” rating. 
• Lion Gate Entertainment Corp (NYSE: LGF) pulled in $341 million in global sales, with $141 million from the US and Canada, on its opening weekend of the last installment of the Twilight Saga. 
• Gold and oil futures are trading higher as the USD drops. 
• Harvard and UPenn ranked Massachusetts the state with the most economic opportunity, from a survey that measured unemployment, residential income and the ability to increase income. 
• The US government has proposed to axe the tax break of $150 billion over the next decade, which is a step toward averting fiscal cliff. The agreement caused a rally in global markets. 
• News Corp (NASDAQ: NWS) has announced that it will close a deal this week to acquire 49% in YES TV with the option to raise stake to 80% within the next 3 to 5 years. YES is valued at around $3 billion. Goldman Sachs and Providence Equity own 40% while the NY Yankees own 34%.
• The Shadow Banking industry rose to $67 trillion in 2011, a $5 trillion increase from 2007 according to the G20’s Financial Stability Board. 

Macro

• Asian Markets: markets rallied from US debt deal with energy sector leading gains. 
• European Markets:  markets also rallied from US debt-deal.
• Rubbish loans from Spanish banks have once again rose to record high of 10.7%. Bad debt has increased by over €3 billion to €182.3 billion. The amount of total loans have also increased to €1.7 trillion while is approximately 170% of the country’s GDP. This, obviously, is not great for the Spanish economy. 
• The European Commission granted ING (NYSE: ING) a two-year extension to repay the unsettled €3 billion aid the Dutch bank received in the bailout, but now it will also have to pay a 50% premium. All must be repaid by 2015.  

Poverty and the Tax Code 

Living in the realms of the tristate area, many of us (myself included) are shielded from the disturbing truth of American poverty. According to The Economist, in 2011 roughly 15% of the entire United States’ population (42.2 million people) were surviving below the poverty line (poverty being defined as an individualized income of $11,702 or $23,201 supporting a family of four). Of this demographic, 19.2 million (45.49%) are minorities. Even more ghastly is the American childhood poverty rate, which is the second highest among developed countries only behind Romania. Approximately 22% (16.4 million) of American children under 18 years old are impoverished, with black and hispanic children accounting for 73.2% of them (2010 U.S. Bureau of the Census). Large proportions of children living below the poverty line is problematic for national progression since the probability of success for these children is appallingly slim. Being one of the richest and most powerful countries in the world, one has to ask how effective our nation’s ability to aid needy citizens in such a way that promotes advancement and stability really is. Many living in these conditions are hard working Americans, but others are simply taking advantage of the system. The dilemma is then how to build a modus operandi that will discourage laziness and reward diligence. Instead of spending a record of $75.5 billion on food stamps during FY2011, what if the United States invested heavily in toddler education? Better pre-k programs would be advantageous for the success of all American children and also alleviate parents the trouble of finding affordable childcare. Another thought is to reward small businesses with tax credits for encouraging the poor into the labor force (ex-laundry mat dry cleaning an outfit for an interview, pre-k watching children while parents are job hunting...etc.). Whilst it is impossible to determine the most prudent way to aggrandize an entire population, reconstructing the tax code and fiscal policies in an approach that would promote society to encourage each other could be a step in the right direction.